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Making decisions
Making decisions

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7.2 Understanding the limits of rationality

An important first step in making more effective decisions is to understand the limits of human rationality. Because of these limits we have developed formal processes for reasoning: statistics; probability theory; modelling methods; and so on. We have also developed technologies such as computers to support us in processing information. These are certainly useful, but it is always important to remember they are used by humans and can be easily subverted. For example:

  • The assumptions on which models are based are often changed to provide the ‘right’ answer.

  • The conclusions reached through a modelling process often ignore the tentative and uncertain nature of the information on which they are based. For example, it is common to see planning figures or outturn estimates expressed to second-decimal precision when the figures on which they are based are accurate only to the nearest thousand.

  • Many options are filtered out long before any formal analysis takes place.

  • The way in which the outputs of formal analysis are framed often affects the final decision.

  • The same data can lead to very different conclusions if decision makers have different assumptions about the way the world works.